Thank you Andrew, I am delighted to be here.
Before I begin, I would like to thank Reform for organising today’s summit; for your valuable research on export policy, supported by Barclays; and for today’s launch of your Export Index, which rightly focuses on encouraging Small and Medium Enterprises.
The Chancellor’s Budget statement last week showed that the government’s long-term economic plan is delivering stability and growth. The fastest growing G7 economy, employment at record levels, inflation at its lowest rate on record, and the deficit as a percentage of GDP forecasted to have halved from 2009-10 figures by the end of 2014-15.
These strong fundamentals in the domestic economy are a crucial foundation for export growth. They have meant manufacturing output growing rapidly – we now produce more cars in Sunderland than they do in the whole of Italy; they have meant investment coming in, again at record levels – up by another 5 per cent in 2013 to £1.262 billion; and they have meant Britain’s global economic reputation restored, with the OECD and the IMF publicly commending our economic policies.
However, there are of course any number of other factors which impact on export performance. Over my time as a Minister in the Foreign and Commonwealth Office, I have seen export figures to individual countries and regions wax and wane. Overall, we have made progress – with exports of goods and services increasing by around £7 billion between 2012 and 2014.
But the global economic backdrop remains a challenging one and it has undoubtedly affected our performance in places. We have had:
stagnation in the Eurozone, meaning pretty flat figures in what is of course by far our largest export market;
fluctuations in demand and weaknesses elsewhere in the global economy – with, for example, the slow growth and weak demand affecting our companies in Brazil as it is everyone else; and
political and security issues also affecting some of our major overseas markets, not least Russia.
So, with this in mind, what should we as government be doing to best support and encourage our exporters, in the face of whatever headwinds they may face?
First of all, it seems to me that we need to diversify, to enable our businesses to operate in a broad spread of export markets. We need to ensure that they can compensate for weaker performance in some markets by taking advantage of other global growth areas. This of course - in turn - helps to insulate the UK’s overall export performance against regional fluctuations.
At the start of this Parliament, around half of our exports went to the EU. The Single Market is one of the great benefits of our membership of the EU, but at a period of Eurozone stagnation, as I have said, we need to ensure that we are not overly-dependent on it.
This is in part why we have made such vigorous efforts to reform the EU, to make it more business friendly, more flexible and competitive, with less red tape. But it is also why we have invested heavily in upgrading our networks and relationships in the fastest growing emerging economies. I have personally spent much of my time as a Minister forging relationships in countries across Asia and the Americas.
We have backed this up with a shift in our resources. We have created hundreds of new staff positions in 23 emerging markets, including 100 in India and China alone; we have opened 9 new Embassies and Consulates and upgraded a further 6; we have undertaken an energetic programme of visits, with for example 80 Ministerial or Royal visits to Latin America since 2010; and we have worked to reinvigorate our traditional networks in these parts of the world, like the Commonwealth - not least through our support for the new Commonwealth Enterprise and Investment Council, run by Lord Marland.
We are also looking to fortify these relationships with new free trade deals – whether the EU-Korea deal of 2011 which has supported an 30% annual growth in British exports there, or the ongoing negotiations with Vietnam and Japan, or the hugely important Trans-Atlantic Trade and Investment Partnership between the EU and the US – which could be the biggest ever, adding up to £10 billion to Britain’s GDP, worth up to £400 a year for every household.
Of course, the decisions to upgrade these relationships with the world’s emerging powers are not just economic, they are geopolitical. Doing so equally helps to support our wider objectives, like the projection of our values and our national security. And it is of course not the case that better relations automatically translate into better trade, and vice-versa.
But we as a government recognise that there is a symbiosis between these things – the economics, the politics, our security - which is why we don’t believe that it makes sense to keep trade separate from our wider foreign policy, and why we have embedded it so centrally into the work of the Foreign and Commonwealth Office.
As a result of our enhanced relations across Asia and the Americas, in particular, and as a result of recent global growth patterns, total annual exports outside of the EU were up to £285bn by 2013, up by over a third since 2009.
Within this we have had some particular successes. We have, for example, almost doubled exports of goods and services to China since 2009, as well as attracting more of its inward investment over the past two years than in the previous 30. But there is more to do. That is why, for example, the Chancellor announced that he was doubling UK Trade and Investment’s resource in China in last week’s budget, and that is why I opened a new Consulate in Wuhan in January, our first new Post in China in 14 years.
The scale of the opportunity in some of these places is staggering – and I know that is a point that has been made by my predecessor, Jeremy Browne, who is here today. In Wuhan, for example, I was told that there were 10,000 building sites currently under construction and a new tube line projected every year for the next five.
But we mustn’t always assume that it will be easy to take advantage of these opportunities – not least, of course, because many of these new markets have very different business environments to the UK. That is why we now see it as a core function of the FCO to ensure that British business can compete in them on a level playing field – by promoting transparency and a rules-based economic system, tackling market distortions and improving market access. We have set aside a £30m fund for this work.
Many of these projects have been hugely valuable: whether our Embassy in Manila mounting a successful lobbying campaign against a discriminatory excise tax, resulting in significant savings for UK food and drinks companies; or the extensive work by our Embassy in Mexico to help the government reform its telecoms sector, opening up opportunities worth £9bn; or work to help the development of an IPR exchange platform in India, to start to address the intellectual property concerns of some of the British companies operating there.
And as part of this, I think there is a particularly important role for government in identifying the really significant long-term economic trends and opportunities, and positioning the UK to take advantage of them. So, for example, we are determined to ensure that London - as Prime Minister David Cameron once put it – “stands alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic Finance anywhere in the world.”
In June last year, we became the first country outside the Islamic world to issue sovereign Islamic ‘Sukuk’ bonds. We see enormous potential in this – we had orders totalling ten times the value of the bond issue. So we want to do more right across the Islamic Finance sector. I was in Kuala Lumpur only last month hosting a round-table of key industry figures, and I have since announced that UK Export Finance, which is already backing a proposed sale of Shariah-compliant bonds by Emirates airlines, expects to make similar guarantees available for future transactions in other industries.
Similarly, we have made clear that we want to become the leading RMB centre outside Asia. In 2014, we became the first G7 country to receive a licence to invest RMB from outside the UK into China. This follows extensive work to build relationships between the People’s Bank of China and Bank of England.
So, we are building new alliances and helping to create the right conditions in which British business can thrive within them. The third pillar of our work is then to ensure that we get right the practical, bread-and-butter support we offer to businesses who want to export. We have taken some significant steps:
The Chancellor announced in the last Autumn Statement a £20 million package of support for first time exporters; and just last week in the Budget a further £12.5m package for 2015/16 to unlock new opportunities for UK businesses.
This complements an intensive programme of support for mid-sized business to help them break into new markets – announced by Trade Minister Lord Livingston last year. We have already met our target of reaching out to 3000 companies.
I shall be urging companies in my constituency of East Devon and indeed across the UK to take advantage of this.
UKTI is also running a number of innovative initiatives, such as an e-Exporting programme to help companies take advantage of new digital opportunities.
UK Export Finance has a new Direct Lending Facility, providing loans through 20 financial institutions to allow overseas buyers to finance the purchase of goods and services from UK exporters.
Meanwhile, we maintain the core services that we know businesses value. For example, our Overseas Business Risk service gives UK businesses free advice based on the latest political and economic analysis.
So we continue to give British business our fullest support. In 2013, British companies told us that we helped them secure nearly £22 billion of international business wins. But strong government support needs to be coupled with effective business-to-business support.
Two years ago, the Prime Minister launched the Overseas Business Networks Initiative – after Lord Heseltine’s independent review of UK competitiveness – the most comprehensive study of business-to-business support capability since the 1990s.
Today, UKTI, the British Chambers of Commerce and other partners are working in around 40 high growth markets to strengthen the business-to-business support for UK companies. So far, we have injected over £14 million of seed investment to build the capacity of our delivery partners – from the Chambers of Commerce to British Business Groups.
And by the end of this month, these delivery partners will have provided advice and assistance to British exporters on 14,000 occasions.
So overall, this has been an extensive programme of activity. Clearly there is plenty more to do in all of these three areas – building new strategic alliances; creating the conditions for our business to succeed; and direct practical support – but I think we have done important work putting in place the building blocks for our export success, for which we can be proud.
And I have no doubt this will all stand us in good stead, when the global economic winds are behind us. As countries around the world recover, they will increasingly demand the world-leading goods and services that the UK offers – from hi-tech to finance, from the creative industries to luxury goods.
But we need to get out there and sell them. As you know, the Prime Minister has spearheaded our economic drive. I was with him when he took the largest ever business delegation to leave this country’s shores to India in February 2013 – only surpassed by the delegation he took to China later that year.
As we travel, we have also invested heavily in our GREAT campaign, a key part of our soft power which has given us a clear and consistent narrative through which to promote the UK and its wares all over the world, and which has already delivered returns to the UK of over £1 billion.
Because above all, for Britain to succeed in a competitive world, we need to continue to send the right messages: that we are, to quote the Chancellor, walking tall again; that we may be a historic country but we are one which remains full of new ideas and energy; and that we are, once again, very much back open for business. Thank you.
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